Executives from Microsoft and Novell defended their controversial business agreement to collaborate and promote integration between Windows and Novell’s SUSE Linux operating systems on Wednesday, saying that Microsoft’s sales organization is now the biggest channel for SUSE Linux and that the deal will help, not hurt the prospects of Linux in the enterprise.

Representatives from the two companies said that Microsoft has opened the door for Linux adoption at large companies such as Wal-Mart and Nationwide Bank, benefiting the open source community.

Still, Novell promised to allay concerns by providing details about the arrangement by the end of May, along with a raft of restated financial quarterly and annual reports, according to Justin Steinman, Director of Marketing for Novell’s Linux and Open Platform Solutions.

Steinman was participating in a session titled “Is the Novell-Microsoft Deal Good for Open Source” at The Open Source Business Conference in San Francisco. Also on the panel were Microsoft’s Linux Labs Director Sam Ramji and open source advocates Jonathan Corbet, executive editor of LWN.net and Allison Randal of O’Reilly Media.

Contrary to its image, within the open source software community, as a threat to open source and Linux, Microsoft is the chief source of Linux business for Novell and the deal between the two companies has been a boon for SUSE Linux, Steinman said.

“Microsoft was Novell’s number one channel partner in the first quarter of 2007,” he said. “We’ve seen 60 percent (first quarter) growth in SUSE, year over year.”

Ramji, of Microsoft, seconded that, saying that the future of networked computing is in heterogeneous environments based on commodity, x86 hardware, and that Windows will have to be able to interoperate with platforms like Linux to survive.

But Ramji and Steinman faced tough criticism from Corbet and Randal, as well as audience members, especially concerning recent claims by Microsoft’s lead attorney that the company will seek royalties from open source users for violations of over 200 company patents.

Microsoft has since backed off claims that it will pursue legal action, but open source advocates — including Novell — have expressed anger at the charge and have been skeptical of the company’s claims.

“I don’t think there’s a lot in that 235 number,” said Novell’s Steinman, referring to the number of patents Microsoft is claiming “but we feel that comments like that are not productive,” he said.

“Novell is paying Microsoft a per unit fee (on sales of SUSE Linux). If there’s not a patent issue, what are you paying for?” he asked. “I feel as if I’m being called a thief and to have it come from within our own community is divisive.”

Under the patent cross licensing and co-development deal, Novell agreed to pay Microsoft a percentage of revenues from open source products, while Microsoft agreed to waive patent claims against users of SUSE Linux. The deal has been a source of controversy since it was unveiled in November, 2006.

So far, the specific details of the agreement have not been made public, but Novell said during the session that it would be making the details public at the end of May as an attachment to its annual 10-K filing for 2006.

That filing has been held up by an internal investigation into stock based compensation practices, which has now completed.

Depending on what those details are, the Microsoft Novell deal could be seen as a serious challenge to the freedoms enjoyed by open source developers, or as an unremarkable business collaboration deal, said Randal of O’Reilly.

Regardless, the deal with Novell hasn’t ceded any power over the open source community to Microsoft that it didn’t already have, Randal said.

“This deal didn’t change the game. My sense is that if this deal were between Microsoft and IBM, it would barely even get mentioned,” she said.

The issue of patents has been front and center at OSBC, which began on Tuesday, and audience members expressed disappointment at the mixed signals coming from Microsoft over possible litigation, and what many perceived as a lack of honest cooperation between Microsoft and the open source community.

“I’m not afraid of Novell coming after me like I’m afraid of Microsoft coming after me,” said Jon Stumpf, Senior Vice President of Engineering at AIG. “I don’t need a new (collaboration) deal on virtualization or ODF. I need cooperation on standards.”

At other times, audience members responded with outright derision at efforts to smooth over the disagreements that have followed from the partnership.

For example, Ramji’s contention that Microsoft’s assertion of patent rights covering portions of Linux and other open source software were merely an effort to “increase transparency” were greeted with laughter — especially since the company has declined to name the patents that have been infringed.

Nat Friedman, chief open source technology officer at Novell, said that he doubted the session would put to bed debate about the cross licensing deal, but expressed optimism that the worst was over.

Novell has already lost two high profile open source developers to Google in the wake of the deal: Samba guru Jeremy Allison December and Linux kernel programmer Robert Love in May, but Friedman said they’re hiring more programmers to work on user interface and kernel programming for SUSE.

Perhaps hoping to change the topic, Novell announced, at the conclusion of the panel that it would be teaming up with the Electronic Frontier Foundation to fight spurious patents worldwide.

“Look at Microsoft. They had to pay US$500 million to Eolas over a patent dispute and spent over $1 billion defending themselves against other suits. They’re sure not going to make back $1 billion on Linux royalty payments,” he said.